Deescalating Europe’s Politics of Resentment

MAR 25, 2015

ATHENS – A German
television presenter recently broadcast an edited video of me, before I
was Greece’s finance minister, giving his country the middle-finger
salute. The fallout has shown the potential impact of an alleged
gesture, especially in troubled times. Indeed, the kerfuffle sparked by
the broadcast would not have happened before the 2008 financial crisis,
which exposed the flaws in Europe’s monetary union and turned proud
countries against one another.

When, in early 2010,
Greece’s government could no longer service its debts to French, German,
and Greek banks, I campaigned against its quest for an enormous new loan from Europe’s taxpayers to pay off those debts. I gave three reasons.

First, the new loans
did not represent a bailout for Greece so much as a cynical transfer of
private losses from the banks’ books onto the shoulders of Greece’s most
vulnerable citizens. How many of Europe’s taxpayers, who have footed
the bill for these loans, know that more than 90% of the €240 billion
($260 billion) that Greece borrowed went to financial institutions, not to the Greek state or its people?

Second, it was
obvious that if Greece already could not repay its existing loans, the
austerity conditions on which the “bailouts” were premised would crush
Greek nominal incomes, making the national debt even less sustainable.
When Greeks could no longer make payments on their mountainous debts,
German and other European taxpayers would have to step in again.
(Wealthy Greeks, of course, had already shifted their deposits to
financial centers like Frankfurt and London.)

Finally, misleading
peoples and parliaments by presenting a bank bailout as an act of
“solidarity,” while failing to help ordinary Greeks – indeed, setting
them up to place an even heavier burden on Germans – was destined to
undermine cohesion within the eurozone. Germans turned against Greeks;
Greeks turned against Germans; and, as more countries have faced fiscal
hardship, Europe has turned against itself.

The
fact is that Greece had no right to borrow from German – or any other
European – taxpayers at a time when its public debt was unsustainable.
Before Greece took any loans, it should have initiated debt
restructuring and undergone a partial default on debt owed to its
private-sector creditors. But this “radical” argument was largely
ignored at the time.

Similarly, European
citizens should have demanded that their governments refuse even to
consider transferring private losses to them. But they failed to do so,
and the transfer was effected soon after.

The result was the
largest taxpayer-backed loan in history, provided on the condition that
Greece pursue such strict austerity that its citizens have lost
one-quarter of their incomes, making it impossible to repay private or
public debts. The ensuing – and ongoing – humanitarian crisis has been
tragic.

Five years after the
first bailout was issued, Greece remains in crisis. Animosity among
Europeans is at an all-time high, with Greeks and Germans, in
particular, having descended to the point of moral grandstanding, mutual
finger-pointing, and open antagonism.

This toxic blame game
benefits only Europe’s enemies. It has to stop. Only then can Greece –
with the support of its European partners, who share an interest in its
economic recovery – focus on implementing effective reforms and
growth-enhancing policies. This is essential to placing Greece, finally,
in a position to repay its debts and fulfill its obligations to its
citizens.

In practical terms, the February 20 Eurogroup agreement,
which provided a four-month extension for loan repayments, offers an
important opportunity for progress. As Greece’s leaders urged at an
informal meeting in Brussels last week, it should be implemented
immediately.

In the longer term,
European leaders must work together to redesign the monetary union so
that it supports shared prosperity, rather than fueling mutual
resentment. This is a daunting task. But, with a strong sense of
purpose, a united approach, and perhaps a positive gesture or two, it
can be accomplished.

Of Greeks and Germans: Re-imagining our
shared future

Any sensible person can see how
a certain video[1] has become part of something
beyond a gesture. It has sparked off a kerfuffle reflecting
the manner in which the 2008 banking crisis began to
undermine Europe’s badly designed monetary union, turning
proud nations against each other.
When, in early 2010, the Greek state lost its capacity to
service its debts to French, German and Greek banks, I
campaigned against the Greek government’s quest for an
enormous new loan from Europe’s taxpayers. Why?
I opposed the 2010 and 2012 ‘bailout’ loans from German and
other European taxpayers because:

the new loans represented not a bailout for Greece but a
cynical transfer of losses from the books of the private
banks to the weak shoulders of the weakest of Greek
citizens. (How many of Europe’s taxpayers, who footed these
loans, know that more than 90% of the €240 billion borrowed
by Greece went to financial institutions, not to the Greek
state or its citizens?)

it was obvious that, at a time Greece could not repay its
existing loans, the austerity conditions for giving Greece
the new loans would crush Greek nominal incomes, making our
debt even less sustainable

the ‘bailout’ burden would, sooner or later, weigh down
German and other European taxpayers once the weaker Greeks
buckled under their mountainous debts (as moneyed Greeks had
already shifted their deposits to Frankfurt, London etc.)

misleading peoples and Parliaments by presenting a bank
bailout as an act of ‘solidarity to Greece’ would turn
Germans against Greeks, Greeks against Germans and,
eventually, Europe against itself.

In 2010 Greece owed not one euro to German taxpayers. We had
no right to borrow from them, or from other European
taxpayers, while our public debt was unsustainable. Period!
That was my ‘controversial’ point in 2010: In 2010, Greece
should have borrowed not one euro before entering into debt
restructuring procedures and partially defaulting to its
private sector creditors.
Well before the May 2010 ‘bailout’, I urged European citizens
to tell their governments not to even think of transferring
private losses to them.
To no avail, of course. That transfer was effected soon after[2] with the largest taxpayer-backed
loan in economic history given to the Greek state on austerity
conditions that have caused Greeks to lose a quarter of their
income, making it impossible to repay private and public
debts, and causing a hideous humanitarian crisis.
That was then, in 2010. What should we do now, in 2015, that
Greece remains in crisis and our people, the Greeks and the
Germans, have, regrettably but also predictably, descended
into a mutual ‘blame game’?
First, we should work towards ending the toxic ‘blame game’
and the moralising finger-pointing which benefit only the
enemies of Europe.
Secondly, we need to focus on our joint interest: On how to
grow and to reform Greece rapidly, so that the Greek state can
best repay debts it should never have taken on while looking
after its citizens as a modern European state ought to do.
In practical terms, the 20th February Eurogroup
agreement offers an excellent opportunity to move forward. Let
us implement it immediately, as our leaders have urged in
yesterday’s informal Brussels meeting.
Looking ahead, and beyond current tensions, our joint task is
to re-design Europe so that Germans and Greeks, along with all
Europeans, can re-imagine our monetary union as a realm of
shared prosperity.
—————————–[1] Whose showing derailed an otherwise
constructive discussion on German television.[2] First in May 2010 (€110 billion) and
then again in the Spring of 2012 (another €130 billion).

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org